Report: Chain restaurants plan to raise pay this year

Salaries for restaurant hourly and corporate positions are on the rise, according to the 2013 Corporate Compensation and Benefits survey conducted by People Report. The study found that restaurants have budgeted for wages to increase on average by as much as 2.7 percent during 2013.

Results represent data from 55 distinct chain restaurant corporations operating 83 restaurant concepts. These concepts represent many well-known brands, including T.G.I. Friday's, Chili's, Ruby Tuesday, The Cheesecake Factory, Panera, Denny's, Domino's Pizza and White Castle.

The majority of chain restaurant employees received salary increases during 2012, and this trend is expected to continue in 2013. In 2012, an average 85 percent of corporate office employees and 74 percent of restaurant managers received a base pay increase last year. Merit increases in both the field and the corporate office, which slowed considerably during the recession, have shown consistent increases and have established themselves firmly in the 2.5–3 percent range over the last three years.

Merit increases, however, are not expected to reach the range seen in the years before the recession (4–4.5 percent) any time soon. When it comes to base pay merit increases for corporate office employees, size mattered in 2013. Large restaurant companies (those with annual sales higher than $500 million) budgeted larger increases for their employees than those budgeted by small (those with annual sales under $150 million) and medium-sized companies, according to the survey.

Company size also played a substantial role in the 2012 results in terms of the relative weight of top executive compensation. On average, compensation of top operations executives — defined as CEO, president and COO — represents 5.2 percent of total company payroll costs. For small companies the weight of top executive compensation grows to 6.3 percent of total payroll costs, while for companies with more than $500 million in sales annually, the percentage is only 2.6 percent.

The survey results also highlighted the importance restaurant managers placed on variable pay. While not all restaurant companies offer a bonus program to their corporate executives and directors, 100 percent reported that their restaurant managers are eligible to receive bonuses.

"The relative importance of bonuses increases as we go up through the restaurant management ranks, with general managers and multi-unit managers typically seeing their total bonus amounts for the year representing 20–30 percent of what they get in base salary. Based on these numbers it is easy to see why restaurant managers were in a tough spot when those bonuses disappeared during the recession," said Victor Fernandez, executive director of insights for People Report and Black Box Intelligence.

For restaurant managers, the weight based on individual performance when calculating their bonuses is on average about 10 percent, with group performance being about 85 percent. The most widely used criteria for group performance when evaluating both corporate office employees and restaurant managers is profit.

The size of the organization was also a factor regarding target bonuses for corporate office employees. For 2013, target bonuses for corporate office employees tend to be lower in small companies than in the rest of the industry overall, while target bonuses for corporate employees in large companies tended to be slightly higher than for the rest of the industry.